Definition

1. Noun:
   • A financial performance measure: Return on investment (ROI) is a ratio used to evaluate the efficiency or profitability of an investment. It calculates the amount of return on an investment relative to its cost.
   • A key metric in corporate finance: It is expressed as a percentage and is calculated by dividing the net gain from an investment by the initial cost of the investment.

Usage Examples

• Noun:
  • The marketing campaign had a high return on investment, generating twice the revenue it cost.
  • Investors always analyze the potential return on investment before funding a new startup.
  • A good return on investment is crucial for the project to receive continued funding.

Advanced Usage

• "to calculate the return on investment": to compute the profitability ratio.
  • We need to calculate the return on investment for the last quarter to present to the board.
• "ROI analysis": the process of evaluating the profitability of different investments.
  • The ROI analysis showed that upgrading our software would be more beneficial than hiring more staff.

Variants and Related Words

• ROI (n): A common abbreviation for "return on investment."
  • The ROI for that asset was over 15%.
• Rate of return (n): A similar concept measuring the gain or loss on an investment over a specified period.
  • The annual rate of return on the bond was 5%.

Synonyms

• Profitability ratio: A financial metric used to assess a business's ability to generate earnings relative to its expenses.
• Gain on investment: The profit earned from an investment.

Related Phrases

• "to yield a high return on investment": to produce a large profit relative to the cost.
  • The new factory is expected to yield a high return on investment within three years.
• "to justify the return on investment": to provide a reason for the profitability that makes an investment worthwhile.
  • The time savings must justify the return on investment for this expensive equipment.

Noun

1. (corporate finance) the amount, expressed as a percentage, that is earned on a company's total capital calculated by dividing the total capital into earnings before interest, taxes, or dividends are paid